IMF financial stability

The IMF GFSR devoted a reasonable amount of words to private credit / private debt, and much of it was negative. Private credit funds have grown very vast, and, given how tight spreads are, and the impact of higher rates on balance sheets and profitability, creates something of a potent mix.

The green text that accompanies each graph does a good enough job that we won’t walk through the below, but the basic gist is “lots of downgrades are likely”.

We agree; although most of our concern is predicated on the incredibly tight credit spreads, and we’ve definitely downweighted credit exposures in our diversified funds, essentially taking profits and either letting the cash build or buying government bonds (which, as we’ve talked a lot about, has been “too early”, given rising yields, but, we default back to our view that at yields above 4%, government bonds are a pretty good deal, ex ante, given the portfolio insurance characteristics).

Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.

This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.

Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.